European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

The right of establishment is a component of the free movement of persons which goes beyond the free movement of goods as commercial trade alone is not the only issue involved. As a fundamental freedom , which is indispensable for the creation of the internal market, the freedom of establishment deals with the very development of undertakings. 
The right of establishment covers the permanent estab …

Freedom of establishment

The second part of the Treaty on the Functioning of the European Union deals with “Non-discrimination and citizenship of the Union”. Every person holding the nationality of a Member State is a citizen of the Union (Art. 20). The Treaty prohibits any discrimination on grounds of nationality (Art. 18). Article 21 provides that every citizen of the Union has the right to move and reside freely within the territory of the Member States. The free movement of persons is designed to contribute to the establishment of an internal market where citizens of the Member States have the possibility to exercise their economic activities and to establish themselves or to provide services everywhere in the territory of the Union. The free movement of persons is entirely governed by the rule on national treatment according to which citizens of another Member States must receive the same treatment as nationals and suffer no discrimination, either direct or indirect, on grounds of their nationality . That principle, which is one of the fundamental legal provisions of the EU , implies the recognition to all European citizens of a right to enter and reside on the territory of any Member State. The imperative character of the rule on non-discrimination applies to all legal relationships within the territory of the European Union . Thus, since the registered office of companies, within the meaning of Article 54 TFEU, determines - as does the nationality of natural persons - their connection to the legal system of a Member State, to allow a Member State in which a company is established to be free to apply different treatment solely on the basis of the fact that the registered office of a company is situated in another Member State would deprive Article 49 of its substance, as the difference in treatment can only be justified by situations which are not objectively comparable .

In addition to a right of entry and residence within the territory of the Member States, the principle of free movement gives every citizen of a Member State the possibility to pursue a professional activity in another Member State. All economic activities are included in the exercise of that right where they are exercised in consideration of a payment.

Case 110/84 Gemeente Hillegom v Hillenius [1985] ECR 3947; Case 270/83 Commission v France [1986] ECR 273, LawLex200900001801JBJ; Case 197/84 Steinhauser v Ville de Biarritz [1985] ECR 1819, LawLex201100000624JBJ.

Case 2/74 Reyners v Belgian State [1974] ECR 631, LawLex200900001650JBJ; Case 71/76 Thieffry v Conseil de l'ordre des avocats de la Cour de Paris [1977] ECR 765, LawLex200900002009JBJ.

Case 36/74 Walrave and Koch v Association Union Cycliste Internationale and others [1974] ECR 1405, LawLex200900001964JBJ; Case 246/80 Broekmeulen v Huisarts Registratie Commissie [1981] ECR 2311, LawLex201200001726JBJ.

Case C-712/19 Novo Banco SA, Judgment of 25 February 2021, LawLex202300003676JBJ.

Principle of national treatment

The right of establishment is a component of the free movement of persons which goes beyond the free movement of goods as commercial trade alone is not the only issue involved. As a fundamental freedom , which is indispensable for the creation of the internal market, the freedom of establishment deals with the very development of undertakings. 

The right of establishment covers the permanent establishment in a Member State other than the one in which the interested person originates. Two situations may be envisaged: the creation of a new undertaking in the host Member State and the creation of an ancillary activity, which does not involve a total transfer of activity. That right implies the elimination of restrictions to movement and residence within the Union for citizens of the Member States who wish to establish themselves in another Member State. Consequently, any resident permit issued can only be declarative of rights . Beyond the purely professional aspect, the principle of non-discrimination involves the recognition of various rights and advantages to European citizens intended to favor their integration in the host country (right to contract, borrow, take action before the courts, access to social security etc.). Establishment is not to be confused with residence under EU law. The citizen of one Member State may establish a professional activity in another Member State without having permanent residence there.

Lastly, the provisions relating to the freedom of establishment are not only concerned with ensuring equal treatment in the host Member State but also with preventing the country of origin from hindering the establishment of one of its nationals in another Member State or of a company formed in accordance with the law of that State within the definition of Article 54 of the Treaty .

Case 205/84 Commission v Germany [1986] ECR 3755, LawLex200900001657JBJ; Case 292/86 Gullung v Conseils de l'ordre des avocats du barreau de Colmar et de Saverne [1988] ECR 111, LawLex200900001823JBJ; Case 197/84 Steinhauser v Ville de Biarritz [1985] ECR 1819, LawLex201100000624JBJ.

Case 48/75 Royer [1976] ECR 497, LawLex200900001985JBJ; Case 157/79 Regina v Pieck [1980] ECR 2171.

See, inter alia, Case 81/87 The Queen v Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust PLC [1988] ECR 5483, LawLex200900002331JBJ; Case C-200/98 X and Y [1999] ECR I-8261, LawLex200700001804JBJ; Case C-141/99 AMID [2000] ECR I-11619, LawLex200700001604JBJ.

The exercising of an independent activity may also take the form of a mere provision of services. The articles of the Treaty on the Functioning of the European Union relative to the freedom of establishment (Art. 49 et seq.) and the freedom to provide services (Art. 56 et seq.) adopt a symmetrical structure. By reference to Article 62, measures intended to achieve the freedom to provide services are adopted on the basis of Article 53 which covers the freedom of establishment. Like the right of establishment, the freedom to provide services constitutes a fundamental provision of the European legal order .

Despite the symmetry of the provisions governing them, the right of establishment and the freedom to provide services should not be confused. Unlike establishment, the provision of services does not involve a transfer of activity from one Member State to another but merely requires that the service be provided from an establishment located in one Member State for another Member State or in favor of a recipient established in another Member State. For the principles relating to the freedom to provide services to be applicable, a service must be provided, the provider of services must already have an establishment in the EU and the provision of services must involve the crossing of a border.

Case C-51/96 and C-191/97 Deliège [2000] ECR I-2549, LawLex200700001592JBJ.

European Business Law

73. Freedom of establishment

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73. Freedom of establishment

Demandez un accès gratuit au contenu exclusif Livv – juristes d’entreprise

Les décisions de justice citées dans ce paragraphe :

Sous parties

Les notions juridiques connexes

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au contenu exclusif Livv – juristes d’entreprise